Operational management of contractual and transactional interactions between buyers, sellers, financial institutions and others involved in the exchange of merchant offerings (e.g., products and/or services) for purposes of commerce have typically been labor and time intensive. Generally, the management of transactions between business entities has been unduly burdensome and inefficient.
Traditional financial processing of the payment aspect of transactions typically involves a buying entity processing invoices or other payment request information received from sellers. Based upon review and acceptance of the invoices, the buying entity generates a payment or payments in one or more of a variety of forms and delivers that payment and associated cash application detail to the seller or sellers at a time and in a manner convenient to the buyer's business practices.
Conventional payment processes have been generally time consuming and have introduced significant operational complexity. For example, a buyer typically engages in contracts with a multitude of different sellers, with each seller generally submitting invoice data in different forms and requiring different payment terms and/or processes. Payment processing has thus typically involved a multitude of different functions that are performed at different times. For instance, payment request information such as that typically presented in an invoice has to be received and processed. Often, invoice processing involves several steps, including the performance of an evaluation of the transaction to ensure that the payment should be made in accordance with the invoice, coding the invoice so that the expense is accounted for correctly in the buyer's financial books of record, approval of the invoice and, upon approval, payment of the invoice. Further, cash flow issues for the buying entity may drive particular payment processing functions/approaches, such as those involving an extension in payment date and any corresponding fees assessed by a seller or sellers involved in the payment date change. In addition, cash flow issues for the selling entity may drive particular cash collection functions/approaches, such as those involving selling the receivable for cash at a discount in advance of receipt of the funds from the buyer and any corresponding fees and recourse requirements enforced on the seller by the entity purchasing the receivable.
Many transactions also involve a variety of parties at different levels of payment hierarchy. For example, when an intermediary seller party sells a product or service to a buying party, the intermediary seller party often sources (i.e., purchases) some or all of the product or service from a performing seller party (e.g., a supplier). The performing seller party performs according to a contract with the intermediary seller party, with the goods and/or services being tendered upon the buying party either directly or indirectly. The intermediary seller party invoices the buying party for the transaction, who pays the intermediary seller party according to terms of a contracted price between the buying and intermediary seller parties. The performing seller party invoices the intermediary seller party for the transaction via a completely distinct and non-related process. The intermediary seller then pays the performing seller according to terms of a contracted price between the intermediary seller and performing seller parties via a process that is completely distinct and non-related to the process whereby the buyer is paying the intermediary seller.
In the above examples, various invoices and related activities (accounting, extension of trade credit, adjustments, etc.) are required for each contract and, where applicable, in the chain of contracts between buyer, intermediary and selling parties. These activities are time consuming, subject to error and often duplicative or conflicting in nature because the different parties are working from different and incomplete versions of information regarding the same transaction. For example, the buying party may either seek financing to pay the supplier without having to come up with the cash immediately or may decide to simply delay payment to the intermediary party to avoid having to come up with the cash immediately. The intermediary party may either seek to accelerate receipt of payment through offering inducements in the form of a discount to the buyer or may sell the receivable to a third party at a discount in return for receiving cash now instead of when the buyer finally remits payment. The intermediary party is in the same position as the buyer relative to the intermediary's interaction with the performing seller. Finally, the performing seller is in the same position as the intermediary party relative to seeking to accelerate its receipt of cash. All of these financing steps may be performed through different financial institutions, each of which is only in possession of some of the information about the transaction and this limited information leads to calculation of a higher cost of funding than if all information was available. These interactions typically involve complex agreements and associations that facilitate the transfer of funds. At times, there can be delays in payment or disputes regarding terms of payment. In addition, this process is highly susceptible to error. Interaction complexity, delay, error and a multitude of other transaction payment characteristics can cost one or more parties to a transaction a significant amount of funds.
Most industries are quite competitive and any cost savings are therefore important. Administrative costs are targeted for reduction as no revenue is directly generated from administrative functions. However, administrative costs associated with commercial transactions have been difficult to reduce in the current business environment with widely diffused data.
The above and other difficulties in the management and coordination of transactions have presented administrative and cost challenges to business entities involved in various aspects of transactions. In particular, the management of payment functions between buyer and seller entities has presented operational, organizational and cost challenges. As the interacting buyer and seller entities operate on multiple organization levels, e.g., disparate branch locations, subsidiaries and others, these challenges are further exasperated. Further, as transactions become more complex, involving multiple parties in multiple countries in a chain of payment, managing and implementing payment functions becomes even more challenging.